Wild swings in the price of silver create even wilder swings in the price of silver securities. But the assets underlying these stocks remain unchanged. These swings make it even more difficult for a regular investor to determine which issues are overpriced, and which are sitting on mountains of uncapitalized equity or unliquidated assets. Let's look at four silver stocks that offer the best risk-reward ratios. While other silver stocks can be profitable for investors, these names offer the lowest risk given their reasonable valuations:
- Hecla Mining Company (HL): Trading today around $6 and with nearly 2 billion in shares outstanding and an industry-consistent earnings per share of $.40, HL remains a significant player in the silver industry. So why has its stock price risen so dramatically? Much of this is due to the fact that its profit potential is tied directly to the price of silver, causing other industry players such as SSRI and EXK to rise more than 6% for the day. It is this connection to commodity prices that gives HL such a high beta coefficient of 2.12, meaning that it is more than twice as volatile as an average stock on the NYSE - and an average of half again as volatile as any other silver stock on any major market. While its low comparatively low price to earnings ratio of 16.86 shows it to be a more stable investment than Coeur d'Alene Mines Corp (CDE) or Alexco Resource (AXU) with their price to earnings ratios of 36.43 and 135.44 respectively, a value investor would do well to wait until the price of silver has had a particularly bad day, leading to an advantageous drop in the price of this issue.
- Mag Silver Corp (MVG): With over $500 million in shares outstanding, it's surprising to learn that
